Negative Gearing, CGT and the 2026 Budget: What Investors Need to Know

The 2026 Federal Budget delivered some of the most significant proposed changes to property taxation in decades. The Government announced reforms to both negative gearing and capital gains tax (CGT), aiming to improve housing affordability and encourage investment into new housing supply.

While the proposals have generated significant debate, investors should focus on understanding what has been announced, who may be affected and how these changes could influence long-term investment decisions.

What Is Changing?

Under the proposed reforms:

Negative gearing will be limited to new builds from 1 July 2027. Investors purchasing established residential properties after Budget night will no longer be able to offset rental losses against salary and wage income.

The 50% CGT discount will be replaced for future gains with an inflation-based cost indexation method and a proposed minimum tax rate of 30% on capital gains.

Importantly, existing property owners retain grandfathering protections for investments already held before the Budget announcement.

What Does This Mean for Property Investors?

Historically, many investors have used negative gearing alongside the 50% CGT discount as part of a long-term property strategy.

Under the proposed rules:

• New residential property may become more attractive than established property.
• Cash flow may become a more important consideration.
• Investment decisions may focus more heavily on underlying growth and rental fundamentals rather than tax outcomes.
• Some investors may reconsider how property fits within their overall portfolio.

Tax outcomes remain important, but they should not be the sole driver of an investment decision.

What About Shares and Other Investments?

One aspect often overlooked is that CGT changes may extend beyond property.

The proposed replacement of the 50% CGT discount applies to individuals, trusts and partnerships more broadly, meaning investors holding shares and other growth assets may also be affected by the new taxation framework.

This highlights the importance of considering investments through the lens of after-tax returns rather than focusing solely on headline performance.

How Could Superannuation Be Affected?

Superannuation continues to remain one of Australia's most tax-effective investment structures.

Many investments held within superannuation already benefit from concessional tax treatment, particularly for members approaching retirement or drawing retirement income.

For some investors, the proposed changes may increase the relative attractiveness of superannuation as a long-term wealth accumulation vehicle, particularly where tax efficiency is a key consideration. However, suitability depends on individual circumstances, contribution limits and access requirements.

Will These Changes Affect Property Prices?

Opinions remain divided.

The Government argues the reforms could improve housing affordability and increase home ownership opportunities by reducing investor demand for established housing. Government modelling suggests approximately 75,000 additional Australians may enter home ownership over the next decade.

Others argue reduced investor participation could impact housing supply, rental availability and future development activity. Some markets have already reported increased uncertainty among investors following the Budget announcements.

The long-term outcome will likely depend on investor behaviour, housing supply and broader economic conditions.

What Should Investors Do Now?

The most important point is that these measures are still progressing through the legislative process, and implementation is proposed from 1 July 2027.

Rather than reacting to headlines, investors should focus on:

• Reviewing existing investment structures
• Understanding potential tax implications
• Assessing cash flow and long-term objectives
• Considering diversification across property, shares and superannuation

Want to know more about tax implications involved around your investments and super?
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